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One of the four major banks in Australia has made revisions
on their home lending policy in accordance with the new banking code that was
recently implemented.

ANZ has recently updated its co-borrower and financial abuse provisions as provided by the new Banking Code of Practice.

The purpose of their revisions is to address the concerns
within the original wording of the declaration forms from which the broking industry
stakeholders are worried to impose legal obligations on brokers who are
unqualified to assess a borrower’s vulnerability.

Let Us Take A Look The Changes That ANZ Has Made:

The broker must document the details of the substantial benefit if each co-borrower is receiving a substantial benefit from a loan. This applies to the following situation:

When the co-borrower will acquire a legal rightful share or a reasonable interest in assets purchased with the loan funds.

When a rightful share of the loan funds is used
to repay the co-borrowers debts or other obligations owed by the co-borrowers.

If in the case that substantial benefit can’t be proven,
some additional questions are required in order to protect a co-borrower.

They have stated that all co-borrowers should understand all the involved risks before entering into the loan. Similarly, they should know the difference between being a co-borrower and a guarantor.

The co-borrowers should provide reasons why they want to become a co-borrower, and this must be in line with the lending policy.

In addition, ANZ revised its
financial abuse declaration form in which a broker’s obligation is to make sure
that all throughout their dealings in accordance with the loan application
that:

None of their applicants has stated that he or
she is subject to financial abuse

They have not seen anything that they would
consider to be a form of financial abuse.

All of the revisions from the ANZ were implemented after the
Australian Banking Association, the Mortgage & Finance Association of
Australia, and the Finance Brokers Association of Australia have all agreed on
a common strategy to identify financial abuse in a co-borrower arrangement.

Nowadays, banks and nonbank financial institutions have stricter requirements with regards to their Home Deposit Loans. Most of these lenders have reduced the loan to valuation ratio that they are willing to offer to their borrowers.

The Variable Mortgage interest rates have gone down to 2.89%, this is in line with the monetary policy adjustments of the RBA (Reserve Bank of Australia).

Canstar, a research and expert ratings agency in Australia,
have presented a snapshot of the mortgage rate environment in compliance with
the RBA’s consecutive adjustments with their monetary policy which predicted
that cash rate fall by a total of 50 basis point to a new record low of 1%.

RBA’s main objective why they need to have a back to back
cut rates is to encourage the labour market, stating that lower rates could
help support the needed growth in employment. The mortgage market promptly
responded to the cut rates as they have already implemented it to their home
loan clients.

NAB
(National Australia Bank), one of the 4 major banks in Australia, has updated
its mortgage serviceability assessment policy.

Their
amendment is in response to APRA’s (Australian Prudential Regulation Authority)
changes to its home lending guidance earlier this month which allowed banks
greater flexibility to set their testing rates after scrapping a minimum of 7%
interest for loan applications by up to 2.5%.

With APRA’s
easing credit conditions, it is intended to boost the borrowing capacity of
many new customers, the RBA (Reserve Bank of Australia) has stated that the conditions
in the housing market were gradually stabilizing following a drawn-out property
downturn, but noted fall in prices had slowed in some markets and auction
clearance rates increased.

NAB has
lowered to a minimum of 5.5%, in line with its major peers. its interest rate
floor to 5.5% and increased its interest rate buffer to 2.5% which covers all
new home loan applications starting August 5.

It is the
latest among the 4 major banks to amend it serviceability policy and joining
all other competitors, the ANZ (Australia and New Zealand Banking Group),
Westpac, and CBA (Commonwealth Bank), Macquarie, MyState Bank, Bendigo and
Adelaide Bank, Suncorp, the Bank of Sydney and Auswide Bank.

The new NAB
interest rate floor is in line with ANZ’s announcement that they would lower
their interest rate floor to 5.5%.

The bank’s
announcement has seen it undercut CBA and Westpac as they are the 2 major
competitors which dropped their rates to only 5.7%.

At this point, Macquarie holds the lowest interest rate floor of 5.3%, on the other hand, MyState dropped its interest rate floor to only 6.2%.

What Is ESA (Exchange
Settlement Account)?

ESA is an account that all banks should have for the purpose
of making payments with each other within the Australian payments system. These
Exchange Settlement Accounts are owned by the Reserve Bank of Australia, there
must be positive balances and are used to settle debts that have accumulated in
the clearing process.

They are also used as a precautionary measure, as the RBA
has committed to cover any gaps in payments among the members, this is to
ensure the Australian payments system functions all the time.

What Is
Superannuation?

Superannuation as it is popularly known as “Super”, it is an amount of money that is set aside while you are working just in time when your retirement comes. Your money is being deposited as a fund, where it is invested in your name by a trustee, so as to help you earn returns and increase your savings.

There are some factors that would affect how much money you will be receiving when you will be retiring. It includes the amount of your contribution, how long have you been investing, on what type of investments that you have chosen, the amount of your money earned from the investment returns, and also the total amount of the fees that you have paid.

The percentage came from a total sample size of 1,012 home loan clients, including non-CBA mortgagors. The result from CBA, which gives an outstanding 91% only means that home ownership is now feasible. The research result has a significant difference in comparison to the research result in the previous year, in which 1 out of 5 Australians or 20% have said that home ownership is not feasible.

SMEs (Small-to-Medium Enterprises) struggles to get a loan application from traditional bank lenders over the years. It is the reason why they go instead to Non-Bank Lenders. A study has shown that SMEs turn their backs away from banks and explore their options for loans to Non-Bank Lenders and their numbers are more likely to increase in the future.

The critical constraint on borrowing limits that were
implemented in late 2014 has been removed by APRA (Australian Prudential
Regulation Authority). It is another move that may encourage the idleness of
the property market.

To make it more specific, APRA has removed its quantitative
guidance on the level of the serviceability floor rate at 7%, which ADIs
(Authorized Deposit-taking Institutions) or banks use to assess home loan
applications.

Household debt to income ratio is the highest in
Australian history. It is based on the recently concluded statistics by the RBA
(Reserve Bank of Australia) as of March this year. It stated that the household
debt is already at 189.7 times the average household disposable income which is
the highest level recorded.

This highest level recorded can be associated with
the increased household costs, stable wage growth and higher mortgages which is
an integral part of the major Australian cities’ high-priced housing market.

On the other hand, the above statement disregards
the complications of the debt problem in Australia. It overlooks the
technological changes to payment methods and spending habits which may be the
reason for the rapid growth in consumer debt.